Deck 16: Pricing and Revenue Management in a Supply Chain

Question 1

Effective differential pricing over time will generally increase the level of product availability for the consumer willing to pay full price,but will decrease total profits for the retailer.

Answer 1

False

Question 2

An order from a lower price buyer should be accepted if the expected revenue from a higher price buyer is lower than the current revenue from the lower price buyer.

Answer 2

True

Question 3

Wastage occurs if higher price buyers have to be turned away because the capacity has already been committed to lower price buyers.

Answer 3

False

Question 4

Revenue management may also be defined as the use of differential pricing based on customer segment,time of use,and product or capacity availability to increase supply chain surplus.

Question 5

The tactic of varying price over time is suitable for assets such as fashion apparel that have a clear date beyond which they lose a lot of their value.

Question 6

To differentiate between the various market segments,the firm must either eliminate barriers that identify product or service attributes the segments value differently.

Question 7

Pricing may influence demand if customers are price sensitive.

Question 8

In most instances of differential pricing,demand from the segment paying the lower price arises earlier in time than demand from the segment paying the higher price.

Question 9

The basic trade-off to consider during overbooking is between having wasted capacity (or inventory)because of few cancellations or having a shortage of capacity (or inventory)because of excessive cancellations.

Question 10

The amount of the asset reserved for the higher price segment is such that the expected marginal revenue from the higher priced segment is less than the price to the lower price segment.

Question 11

Faced with seasonal peaks,an effective revenue management tactic is to charge a higher price during the peak period and a higher price during off-peak periods.

Question 12

Spoilage occurs when the capacity reserved for higher price buyers is wasted because demand from the higher price segment does not materialize.

Question 13

Revenue management adjusts the pricing and available supply of assets to maximize profits.

Question 14

In theory,the concept of differential pricing decreases total cost for a firm.

Question 15

The tactic of overbooking or overselling the available asset is suitable in any situation where customers are able to cancel orders and the value of the asset drops significantly after a deadline.

Question 16

The cost of a capacity shortage is the increase in productivity that results from having to go to a backup source.

Question 17

Unused capacity from the past is extremely valuable.

Question 18

The cost of wasted capacity is the margin that would have been generated if the capacity had been used for production.

Question 19

Revenue management is the use of marketing to increase the profit generated from a limited supply of supply chain assets.

Question 20

The goal when making the overbooking decision is to maximize supply chain profits by minimizing the cost of wasted capacity and the cost of capacity shortage.

Question 21

Pricing can be used to

A)change available supply.
B)reduce supply chain costs.
C)influence demand if customers are price sensitive.
D)all of the above

Question 22

Shifting demand from peak to off-peak periods is beneficial if the discount given during the off-peak period is more than offset by the decrease in cost because of a smaller peak and the increase in revenue during the off-peak period.

Question 23

Revenue management is

A)the use of marketing tools to increase revenue.
B)the use of pricing to increase the profit generated from a limited supply of supply chain assets.
C)a process designed to determine the best use of funds generated through sales.
D)the use of accounting tools to monitor cash flow.

Question 24

The amount reserved for the spot market should be such that the expected marginal revenue from the spot market equals the current revenue from a bulk sale.

Question 25

The reserved quantity will be affected by the difference in margin between the spot market and the bulk sale,but not the distribution of demand from the spot market.

Question 26

Any asset that loses value over time is perishable.

Question 27

To differentiate between the various market segments,the firm must

A)create barriers by identifying product or service attributes that the segments value differently.
B)eliminate barriers that identify product or service attributes that the segments value differently.
C)negotiate separately with different market segments that value product or service attributes differently.
D)develop pricing structures based on the volume of various product or service attributes.

Question 28

Revenue management has a significant impact on supply chain profitability if

A)demand is stable and predictable.
B)the value of the product does not change regardless of market.
C)the product is sold both in bulk and on the spot market.
D)the product has a long shelf life.

Question 29

Revenue management may be defined as

A)the use of differential costing based on product or capacity availability to decrease supply chain cost.
B)the use of differential costing based on customer segment,time of use,and product or capacity availability to increase profitability.
C)the use of differential pricing based on customer segment,time of use,and product or capacity availability to decrease supply chain surplus.
D)the use of differential pricing based on customer segment,time of use,and product or capacity availability to increase supply chain surplus.

Question 30

The goal of optimization is to use forecasts of customer behavior to identify a revenue management tactic that will be most effective.

Question 31

The two forms of supply chain assets are

A)capacity and inventory.
B)capacity and revenue.
C)inventory and revenue.
D)inventory and warehouse space.

Question 32

Too low a level of overbooking will lead to unutilized assets and lost revenue.

Question 33

In most instances of differential pricing,demand from the segment paying the lower price

A)arises earlier in time than demand from the segment paying the higher price.
B)arises later in time than demand from the segment paying the higher price.
C)arises about the same time as demand from the segment paying the higher price.
D)arises both earlier and later in time than demand from the segment paying the higher price.

Question 34

The use of differential pricing should

A)decrease total profits for a firm.
B)increase total profits for a firm.
C)increase capacity for a firm.
D)decrease capacity utilization for a firm.

Question 35

Ultimately,a proper understanding of customer preferences and a quantification of the impact of various tactics on consumer behavior are at the core of successful revenue management.

Question 36

Revenue management uses

A)the marketing mix to increase revenue.
B)the supply chain mix to decrease expenses.
C)static pricing to increase revenue.
D)differential pricing to increase revenue.

Question 37

The forecasting function is not necessary for most revenue management systems.

Question 38

Revenue management has a significant impact on supply chain profitability if

A)demand is stable and predictable.
B)the value of the product varies in different market segments.
C)the product is sold in many retail outlets.
D)the product has a long shelf life.

Question 39

Salespeople must understand the revenue management tactic in place so they can align their sales pitch accordingly.

Question 40

Customers will have a negative perception of revenue management tactics if they are simply presented as a mechanism for extracting maximum revenue.

Question 41

If higher price buyers have to be turned away because the capacity has already been committed to lower price buyers,this is

A)spill.
B)spoilage.
C)wastage.
D)excess.

Question 42

The amount of the asset reserved for the higher price segment is such that

A)all orders from the lower priced segment will be accepted and filled.
B)the expected marginal revenue from the higher priced segment is more than the price to the lower price segment.
C)the expected marginal revenue from the higher priced segment is less than the price to the lower price segment.
D)the expected marginal revenue from the higher priced segment equals the price to the lower price segment.

Question 43

Scenario 16.5 - Sanitary Landfill
The sanitary landfill charges companies $150 per load and individuals $40 per load.On average,80 companies tip their trucks each day at the landfill with a standard deviation of 15.There is time only for 110 deliveries in any combination of companies and individuals throughout the course of an eight-hour day.Company dump trucks enter through Gate A and individuals enter through Gate B.Individual demand is plentiful - often there are individuals turned away due to lack of capacity.
Refer to Scenario 16.5.It costs the landfill $10 to process a company dump truck and $5 to process an individual load.How many individuals should be admitted each day?

A)20
B)22
C)24
D)26

Question 44

Scenario 16.5 - Sanitary Landfill
The sanitary landfill charges companies $150 per load and individuals $40 per load.On average,80 companies tip their trucks each day at the landfill with a standard deviation of 15.There is time only for 110 deliveries in any combination of companies and individuals throughout the course of an eight-hour day.Company dump trucks enter through Gate A and individuals enter through Gate B.Individual demand is plentiful - often there are individuals turned away due to lack of capacity.
Refer to Scenario 16.5.It costs the landfill $10 to process a company dump truck and $5 to process an individual load.What is the expected profit for one day if the landfill allocates the optimal quantity of capacity to company trucks and individuals fill up the remainder of the capacity?

A)$13,000
B)$13,300
C)$13,600
D)$13,900

Question 45

Scenario 16.5 - Sanitary Landfill
The sanitary landfill charges companies $150 per load and individuals $40 per load.On average,80 companies tip their trucks each day at the landfill with a standard deviation of 15.There is time only for 110 deliveries in any combination of companies and individuals throughout the course of an eight-hour day.Company dump trucks enter through Gate A and individuals enter through Gate B.Individual demand is plentiful - often there are individuals turned away due to lack of capacity.
Refer to Scenario 16.5.How many individuals should be admitted each day?

A)15
B)17
C)19
D)21

Question 46

Scenario 16.1 - The Stone Lion
The Stone Lion,a bed and breakfast located in a sleepy town,caters to two groups of customers,young couples interested in something marginally more exotic than a staycation,and corporate clients interested in doing some team-building at a location with no cellular service.Corporations know they can get rooms with minimal notice,but young couples on tight budgets tend to plan well in advance of their planned stay at the property.The corporate rate for rooms is $250 per person and the demand pattern is normal with a mean of 20 and a standard deviation of 10.The proprietor of the Stone Lion takes pity on the young couples and charges them only $150 for identical accommodations.
How many rooms should be reserved for corporate clients?

A)17
B)14
C)13
D)10

Question 47

Which of these combinations of goods is currently offered as a means of revenue management?

A)DVDs and streaming services
B)Extra crispy and original recipe fried chicken
C)Paperback and hard cover books
D)Rolls Royce vehicles and General Motors vehicles

Question 48

Scenario 16.1 - The Stone Lion
The Stone Lion,a bed and breakfast located in a sleepy town,caters to two groups of customers,young couples interested in something marginally more exotic than a staycation,and corporate clients interested in doing some team-building at a location with no cellular service.Corporations know they can get rooms with minimal notice,but young couples on tight budgets tend to plan well in advance of their planned stay at the property.The corporate rate for rooms is $250 per person and the demand pattern is normal with a mean of 20 and a standard deviation of 10.The proprietor of the Stone Lion takes pity on the young couples and charges them only $150 for identical accommodations.
What is the difference in the number of rooms that should be held by the Stone Lion if the standard deviation of corporate demand increases by five and if it decreases by five?

A)1
B)2
C)3
D)4

Question 49

The basic trade-off to be considered by the supplier with production capacity is between

A)committing to an order from a high-price buyer or waiting for a lower price buyer to arrive later on.
B)committing to an order from a lower price buyer or waiting for a high-price buyer to arrive later on.
C)allowing the market to be controlled by price or capacity.
D)having marketing or operations establish the constraints within which orders are accepted.

Question 50

Scenario 16.5 - Sanitary Landfill
The sanitary landfill charges companies $150 per load and individuals $40 per load.On average,80 companies tip their trucks each day at the landfill with a standard deviation of 15.There is time only for 110 deliveries in any combination of companies and individuals throughout the course of an eight-hour day.Company dump trucks enter through Gate A and individuals enter through Gate B.Individual demand is plentiful - often there are individuals turned away due to lack of capacity.
Refer to Scenario 16.5.It costs the landfill $10 to process a company dump truck and $5 to process an individual load.What is the difference in one day's expected profit between operating with revenue management and operating without using the technique?

A)$6,320
B)$7,230
C)$8,560
D)$9,450

Question 51

Effective differential pricing over time will generally

A)decrease the level of product availability for the consumer willing to pay full price and also decrease total profits for the retailer.
B)decrease the level of product availability for the consumer willing to pay full price but will increase total profits for the retailer.
C)increase the level of product availability for the consumer willing to pay full price and also increase total profits for the retailer.
D)increase the level of product availability for the consumer willing to pay full price but will decrease total profits for the retailer.

Question 52

The tactic of varying price over time is suitable for assets

A)that do not have a clear date beyond which they lose a lot of their value.
B)that have a clear date beyond which they lose a lot of their value.
C)where customers are able to cancel orders and the value of the asset drops significantly after a deadline.
D)where customers are unable to cancel orders and the value of the asset drops significantly after a deadline.

Question 53

Scenario 16.1 - The Stone Lion
The Stone Lion,a bed and breakfast located in a sleepy town,caters to two groups of customers,young couples interested in something marginally more exotic than a staycation,and corporate clients interested in doing some team-building at a location with no cellular service.Corporations know they can get rooms with minimal notice,but young couples on tight budgets tend to plan well in advance of their planned stay at the property.The corporate rate for rooms is $250 per person and the demand pattern is normal with a mean of 20 and a standard deviation of 10.The proprietor of the Stone Lion takes pity on the young couples and charges them only $150 for identical accommodations.
If the corporate price and young couples' price both double,how many additional rooms should the Stone Lion hold for corporate clients?

A)3
B)2
C)1
D)0

Question 54

The tactic of overbooking or overselling the available asset is suitable where

A)there is a clear date beyond which the asset loses a lot of its value.
B)there is no clear date beyond which the asset loses a lot of its value.
C)customers are able to cancel orders and the value of the asset drops significantly after a deadline.
D)customers are unable to cancel orders and the value of the asset drops significantly after a deadline.

Question 55

Scenario 16.1 - The Stone Lion
The Stone Lion,a bed and breakfast located in a sleepy town,caters to two groups of customers,young couples interested in something marginally more exotic than a staycation,and corporate clients interested in doing some team-building at a location with no cellular service.Corporations know they can get rooms with minimal notice,but young couples on tight budgets tend to plan well in advance of their planned stay at the property.The corporate rate for rooms is $250 per person and the demand pattern is normal with a mean of 20 and a standard deviation of 10.The proprietor of the Stone Lion takes pity on the young couples and charges them only $150 for identical accommodations.
If the corporate demand and standard deviation both decrease by 50%,how many rooms should be reserved for corporate clients?

A)7
B)8
C)9
D)10

Question 56

In order for a freight railroad to take advantage of revenue management opportunities,

A)there must be no air freight.
B)they should establish regularly scheduled trains.
C)they must reserve one box car on each train for luxury items.
D)there must be no air freight or truck transportation.

Question 57

Scenario 16.5 - Sanitary Landfill
The sanitary landfill charges companies $150 per load and individuals $40 per load.On average,80 companies tip their trucks each day at the landfill with a standard deviation of 15.There is time only for 110 deliveries in any combination of companies and individuals throughout the course of an eight-hour day.Company dump trucks enter through Gate A and individuals enter through Gate B.Individual demand is plentiful - often there are individuals turned away due to lack of capacity.
Refer to Scenario 16.5.How many company dump trucks should be admitted each day?

A)85
B)87
C)89
D)91

Question 58

An order from a lower price buyer

A)should always be accepted rather than waiting for potential revenue from a higher price buyer.
B)should only be accepted if the expected revenue from a higher price buyer is higher than the current revenue from the lower price buyer.
C)should be accepted if the expected revenue from a higher price buyer is lower than the current revenue from the lower price buyer.
D)should not be accepted if the expected revenue from a higher price buyer is lower than the current revenue from the lower price buyer.

Question 59

When the capacity reserved for higher price buyers is wasted because demand from the higher price segment does not materialize,this is

A)spill.
B)spoilage.
C)wastage.
D)excess.

Question 60

Scenario 16.1 - The Stone Lion
The Stone Lion,a bed and breakfast located in a sleepy town,caters to two groups of customers,young couples interested in something marginally more exotic than a staycation,and corporate clients interested in doing some team-building at a location with no cellular service.Corporations know they can get rooms with minimal notice,but young couples on tight budgets tend to plan well in advance of their planned stay at the property.The corporate rate for rooms is $250 per person and the demand pattern is normal with a mean of 20 and a standard deviation of 10.The proprietor of the Stone Lion takes pity on the young couples and charges them only $150 for identical accommodations.
If the price young couples are willing to pay increases by 50%,how many rooms should be reserved for corporate clients?

A)17
B)7
C)4
D)10

Question 61

Scenario 16.3 - AITP's Revenge
The student chapter of the Association of Information Technology Professionals (AITP)notices the success that the APICS student chapter has with their traditional barbecue sauce fundraiser.Blinded by their jealousy,the club officers decide to sell a competing product,clocks made out of junk computer parts that the club sponsor whips up in his garage.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the computer clock season,which is four months.Twenty-five years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 20-p1,in the second month as 20-1.4p2,in the third month 20-1.8p3,and in the fourth month 20-2.2p4.
The components needed to produce a computer clock cost twenty-five cents.What should the price of the computer clocks be in the first month of the selling season?

A)$5.68
B)$7.27
C)$10.13
D)$14.52

Question 62

Wasted capacity (or inventory)occurs when

A)there are excessive cancellations.
B)there are few cancellations.
C)an expensive backup needs to be arranged.
D)all of these

Question 63

Scenario 16.2 - Card Table Vendor
The traditional fundraiser for the student chapter of APICS is pint mason jars filled with a tangy barbecue sauce that the club sponsor whips up in his kitchen.The sponsor is independently wealthy,so he donates his time and materials to the fundraising effort.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the barbecue season,which is four months.Eighteen sad years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 400-p1,in the second month as 400-1.4p2,in the third month 400-1.8p3,and in the fourth month 400-2.2p4.The club sponsor has only 400 spare mason jars this year after a busy summer collecting specimens.
What is the expected revenue if the student APICS chapter uses dynamic pricing?

A)$83,975
B)$84,349
C)$84,719
D)$85,209

Question 64

An effective revenue management tactic when faced with seasonal peaks is to charge a

A)high price during the peak period and a higher price during off-peak periods.
B)higher price during the peak period and a lower price during off-peak periods.
C)lower price during the peak period and a higher price during off-peak periods.
D)low price during the peak period and a lower price during off-peak periods.

Question 65

The cost of wasted capacity is

A)the reduction in margin that results from having to go to a backup source.
B)the margin that would have been generated if the capacity had been used for production.
C)the productivity increase generated when the capacity is used for production.
D)the sales potential of excess capacity kept in reserve for emergency production.

Question 66

The goal when making the overbooking decision is to maximize supply chain profits by

A)maximizing the value of wasted capacity and the cost of capacity shortage.
B)maximizing supply chain profits.
C)minimizing the cost of wasted capacity and the cost of capacity shortage.
D)minimizing the cost of wasted capacity and minimizing capacity shortages.

Question 67

A shortage of capacity (or inventory)occurs when

A)there are excessive cancellations.
B)there are few cancellations.
C)an expensive backup needs to be arranged.
D)B and C only

Question 68

The basic trade-off to consider during overbooking is between

A)having wasted capacity (or inventory)or a shortage of capacity (or inventory).
B)having lost sales or a shortage of capacity (or inventory).
C)having wasted capacity (or inventory)or excess capacity (or inventory).
D)having high sales or a shortage of capacity (or inventory).

Question 69

Shifting demand from peak to off-peak periods is beneficial if the discount given

A)during the off-peak period is more than offset by the decrease in cost because of a larger peak.
B)during the off-peak period is more than offset by the decrease in cost because of a smaller peak.
C)during the peak period is more than offset by the decrease in cost because of a smaller peak.
D)during the peak period is more than offset by the decrease in cost because of a larger peak.

Question 70

Scenario 16.2 - Card Table Vendor
The traditional fundraiser for the student chapter of APICS is pint mason jars filled with a tangy barbecue sauce that the club sponsor whips up in his kitchen.The sponsor is independently wealthy,so he donates his time and materials to the fundraising effort.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the barbecue season,which is four months.Eighteen sad years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 400-p1,in the second month as 400-1.4p2,in the third month 400-1.8p3,and in the fourth month 400-2.2p4.The club sponsor has only 400 spare mason jars this year after a busy summer collecting specimens.
Responding to customer complaints (primarily from period 1 purchasers)the student APICS chapter decides to use static pricing over the four month season.The club sponsor makes a deal with the local bootlegger to supply him with all the mason jars he will need for the barbecue season.What is the total revenue for the season's sales at the optimal price?

A)$89,490
B)$94,747
C)$100,000
D)$90,247

Question 71

Scenario 16.3 - AITP's Revenge
The student chapter of the Association of Information Technology Professionals (AITP)notices the success that the APICS student chapter has with their traditional barbecue sauce fundraiser.Blinded by their jealousy,the club officers decide to sell a competing product,clocks made out of junk computer parts that the club sponsor whips up in his garage.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the computer clock season,which is four months.Twenty-five years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 20-p1,in the second month as 20-1.4p2,in the third month 20-1.8p3,and in the fourth month 20-2.2p4.
The components needed to produce a computer clock cost twenty-five cents.What should the price of the computer clocks be in the third month of the selling season?

A)$14.52
B)$10.13
C)$7.27
D)$5.68

Question 72

Uber's use of surge pricing serves to

A)lower demand and increase supply during busy times.
B)lower demand and lower supply during busy times.
C)increase demand and lower supply during busy times.
D)increase demand and increase supply during busy times.

Question 73

Hotels use differential pricing by day of week and time of year

A)in order to shift demand from peak periods to off-peak periods.
B)in order to increase demand during off-peak periods.
C)in order to shift revenue from peak periods to off-peak periods.
D)in order to shift profit from peak periods to off-peak periods.

Question 74

The cost of a capacity shortage is

A)the reduction in margin that results from having to go to a backup source.
B)the margin that would have been generated if the capacity had been used for production.
C)the productivity increase generated when the capacity is used for production.
D)the sales potential of excess capacity kept in reserve for emergency production.

Question 75

Scenario 16.2 - Card Table Vendor
The traditional fundraiser for the student chapter of APICS is pint mason jars filled with a tangy barbecue sauce that the club sponsor whips up in his kitchen.The sponsor is independently wealthy,so he donates his time and materials to the fundraising effort.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the barbecue season,which is four months.Eighteen sad years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 400-p1,in the second month as 400-1.4p2,in the third month 400-1.8p3,and in the fourth month 400-2.2p4.The club sponsor has only 400 spare mason jars this year after a busy summer collecting specimens.
What should the price be in period 3?

A)$185.13
B)$181.27
C)$177.43
D)$173.61

Question 76

Scenario 16.2 - Card Table Vendor
The traditional fundraiser for the student chapter of APICS is pint mason jars filled with a tangy barbecue sauce that the club sponsor whips up in his kitchen.The sponsor is independently wealthy,so he donates his time and materials to the fundraising effort.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the barbecue season,which is four months.Eighteen sad years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 400-p1,in the second month as 400-1.4p2,in the third month 400-1.8p3,and in the fourth month 400-2.2p4.The club sponsor has only 400 spare mason jars this year after a busy summer collecting specimens.
Responding to customer complaints (primarily from period 1 purchasers)the student APICS chapter decides to use static pricing over the four month season.The club sponsor makes a deal with the local bootlegger to supply him with all the mason jars he will need for the barbecue season.What is the optimal price to charge for their barbecue sauce?

A)$122.50
B)$125.00
C)$127.50
D)$130.00

Question 77

Most firms must decide what fraction of an asset to

A)sell in bulk and what fraction of the asset to discard.
B)save for the spot market and what fraction of the asset to discard.
C)save for emergencies and what fraction of the asset to rework.
D)sell in bulk and what fraction of the asset to save for the spot market.

Question 78

Scenario 16.2 - Card Table Vendor
The traditional fundraiser for the student chapter of APICS is pint mason jars filled with a tangy barbecue sauce that the club sponsor whips up in his kitchen.The sponsor is independently wealthy,so he donates his time and materials to the fundraising effort.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the barbecue season,which is four months.Eighteen sad years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 400-p1,in the second month as 400-1.4p2,in the third month 400-1.8p3,and in the fourth month 400-2.2p4.The club sponsor has only 400 spare mason jars this year after a busy summer collecting specimens.
What should the price be in period 1?

A)$287.50
B)$275.00
C)$262.50
D)$250.00

Question 79

Scenario 16.3 - AITP's Revenge
The student chapter of the Association of Information Technology Professionals (AITP)notices the success that the APICS student chapter has with their traditional barbecue sauce fundraiser.Blinded by their jealousy,the club officers decide to sell a competing product,clocks made out of junk computer parts that the club sponsor whips up in his garage.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the computer clock season,which is four months.Twenty-five years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 20-p1,in the second month as 20-1.4p2,in the third month 20-1.8p3,and in the fourth month 20-2.2p4.
The components needed to produce a computer clock cost twenty-five cents.How many clocks should the AITP club produce?

A)39
B)47
C)55
D)63

Question 80

Scenario 16.3 - AITP's Revenge
The student chapter of the Association of Information Technology Professionals (AITP)notices the success that the APICS student chapter has with their traditional barbecue sauce fundraiser.Blinded by their jealousy,the club officers decide to sell a competing product,clocks made out of junk computer parts that the club sponsor whips up in his garage.Club officers set up a card table in the atrium of the business building and take turns staffing it for the duration of the computer clock season,which is four months.Twenty-five years of experience have revealed that demand varies depending on the month of the season.Customer demand in the first month can be described as 20-p1,in the second month as 20-1.4p2,in the third month 20-1.8p3,and in the fourth month 20-2.2p4.
The components needed to produce a computer clock cost twenty-five cents.What is the expected profit if the AITP club sponsor produces the optimal number of clocks?

A)$263.72
B)$262.54
C)$260.97
D)$269.41